Regis Resources Limited

Welcome to the Regis Resources Limited quarterly results briefing. All lines will be placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press the star one again. For operator assistance throughout the call, please press star zero. And finally, I would like to advise all participants that this call is being recorded. Thank you. I'd now like to welcome Jim Bayer, Managing Director and CEO to begin the conference. Jim, over to you.

Thanks, Paulie. Good morning, everyone, and thanks for joining us on the Regis Resources March 2023 quarterly update, which looks like it's a very busy morning this morning with a lot of reports coming out, so thanks for joining us. Firstly, I'd note that I am joined here around the table with our CFO, Anthony Rakiki, and also with Stuart Gouler, our COO, along with Ben Goldbloom, Head of Investor Relations. Despite production falling below expectations, we made good progress on our long-term plans during the quarter and we achieved a significant milestone at our growth project at McPhillomys. But first on safety, our LTIFR, lost time injury frequency rate, was steady and well below industry average at 0.6. It goes without saying that in any way the health and wellbeing of our people will always be a priority focus for the company and we are proud of the progress that we've made. The installation of the nine megawatt solar farm at Duketon South is on track and we expect it to be commissioned in the June quarter of this year, so just a couple of months away. And we're looking forward to the first power from the farm as it not only reduces our carbon emissions but it also delivers direct power cost savings through the reduction of diesel fuel that's consumed currently for the DSO mills. Over the last two years, we've invested heavily in growth capital at our operations, totaling nearly $350 million. This investment phase is coming to an end with the declaration of commercial production coming up at Gardenwell Underground at Havana Pit in the June quarter. And with this, we start the transition from investment to cash build. For the March quarter, overall, we produced just under 104,000 ounces of gold at an all-in sustaining of $18.27 Aussie an ounce. Growth capital was $73.5 million. With the lower-than-expected production in March, we adjusted and tightened our FY23 full-year production and increased our AISC guidance to $17.95 to $18.45 an ounce, as was released back on 17 April. The June quarter has seen production rates at Duketon South return to planned rates, while at Duketon North we're seeing the wet weather having an ongoing impact this month. And Stuart will make some comment on that a little bit later. Notwithstanding the impact at Duketon North, we are expecting a lifting gold production in cash generation to finish off this financial year. I'll now hand over to Stuart Guler, who will provide some more information on the operational performance. Thanks, Stuart.

Thanks Jim and good morning everyone. Looking more closely at the operations, Duketon Gold production was lower at approximately 77,000 ounces at an AISC of $1,919 an ounce and Tropicana was also lower at just over 27,000 ounces at an AISC of 1,458. Duketon North had lower production at just under 15,000 ounces at $2,948 an ounce due to wet weather events limiting overall material movement. This was offset by decreasing strip ratios as geotechnical issues from the December quarter were addressed, enabling better access to ore. Access to ore will continue to improve in the June quarter, thereby improving its cash margins. However, we do note that wet weather and its impacts has continued into April, and it's largely affecting mining at our Blenheim pit, which is our single largest high-grade source of ounces at DNO. With DNO in the twilight of its current life, we lack the previous flexibility to mine from alternative sources in these types of events. However, we see this as a timing issue only and don't currently see any further impact on our guidance. The situation will continue to be monitored though. We acknowledge the thin margins realised at Duketon North this year, and whilst the opportunity for potential exploration success remains, along with resource to reserve conversion, A number of scenarios are being evaluated in relation to the value contribution that DNO makes to the Duketon life of mine. Duketon South production was also lower at just under 62,000 ounces at $1,673 an ounce AISC. As a processing plant experienced maintenance events, limiting throughput and ramp up of water delivery from the garden wall underground was slower than we expected. Garden Well Underground is a new mine, and we'd planned for issues associated with ground conditions and dewatering, but ultimately what we provided for and what manifested in the field differed. However, the teams have successfully learned how to deal with and overcome the varying conditions that we've experienced, and we're now moving forward at more acceptable levels of performance in line with their expectations. Pleasingly, Garden Well South Underground delivered greater than 40,000 tonnes in March As this production rate continues into the June quarter, we will declare commercial production at the mine. The production maintenance issues experienced at DSO in the March quarter have since been rectified and we are seeing a much improved performance in the June quarter. Across the Tropicana, Tropicana delivered a lower quarter at slightly more than 27,000 ounces for an AISC of 1,458 as stated previously. The shortfall in gold production was in part driven from underground mines as they experienced issues with frozen stoves and result in lower oil production for the period. Open pit mining was also significantly lower as it was impacted by low fleet availability and productivity issues. The underground production issues have been rectified and we are expecting improved performance in the June quarter. We expect to declare commercial production at the Havana open pit as we see increased ore to mill feed and associated gold production. That's it from me and I'll now hand over to Anthony for the financials.

Thanks Stuart. On to the financials now for the quarter. We sold just over 105,000 ounces of gold at an average price of $2,477 an ounce, which includes the effect of the hedges. This delivered $261 million of gold sales, which included some record spot prices for the company. Operating cash flows remained strong. Overall, we generated a total of $99 million in operating cash flows, again including those hedges, with approximately $58 million from Duketon and $41 million coming from Tropicana. Talking on an accruals basis, as we see in Table 1 of the quarterly report, mine site capital expenditure during the quarter was $93 million. In addition, exploration and McPhillamy's expenditure for the quarter was $18 million. Growth capital was high this quarter at $74 million due to the ongoing development of the Garden Well Underground and the Havana Cutback, and this time also an increase in pre-production activity at DSO's Ben Hur line. With the Garden Well, Underground and Havana open pit transitioning to commercial production in the June quarter, growth capex reduces accordingly, with costs then reporting to all in sustaining costs for those mining areas. I'll now point you to figure four of the quarterly report, which outlines the quarter's cash flows. Cash and bullion closed at $204 million at 31 March. You can see that operating cash flows were $128 million. Partially offsetting this was $29 million in hedge losses owing to the delivery of a further 25,000 ounces into our hedging program. You can see that over to the right of the waterfall chart where the hedge losses come in. Furthermore, we spent $89 million on CapEx, $15 million on exploration and McPhilemys, and corporate and finance costs were $9 million in the quarter. We also received a significant cash tax refund. As flagged in the December quarterly report, in March we received a $67 million tax refund relating to the lost carryback tax offset arrangements. In closing I note that increasing gold production in the June quarter should provide an improvement in cash generation to finish off the year. Thank you and back to you Jim.

Thanks Anthony. Look on the growth front our projects have made good progress during the quarter. as you've heard Gardenwell Main underground and I draw your attention to sorry the good progress at Gardenwell South underground at Gardenwell Main underground I draw your attention to figure five in the in the release which shows progress of the decline and the initial target zone the underground exploration decline at that decline we've now completed nearly 550 meters to date, with the first diamond drill cores being delivered to the surface. And on that, we're very excited to see some fine-grained visible gold observed in quartz veins hosted by altered basalt, which means we're seeing what we'd hoped to see and where we'd hoped to see it. So it's still early days, but it's very exciting. We're expecting assay results in this current quarter. and we're also on track for the decline in the diamond drilling to be completed by the end of this calendar year. We expect that when we release our resource and reserve statement for 2023 in June sometime, along with the exploration update, we'll be in a position to provide some more information on the progress of this work. But it's safe to say that we remain very excited about the potential growth of this garden well underground area and are expecting this to deliver some significant value for the company. The underground story and storyline at Tropicana is very similar to Duketon. Continuity of the underground is progressing as planned. uh with reserves actually out placing depletion so in the last 12 months we replaced depletion and we added another 50 000 ounces that's at 100 in in calendar as as in cy22 which was announced earlier this year and basically it's great to see exactly as we were anticipating a tropicana underground is replacing its depletion and adding a little bit of life as well which is um very pleasing to see At McPhillamy's we achieved a major project, a major approvals milestone with the New South Wales Independent Planning Commission giving the final state approval for the project. This is recognition of the substantial amount of work the McPhillamy's team in New South Wales have done in working with all of the stakeholders to make this an approvable and a viable project. In relation to completing the feasibility study and taking this project to FID, we still have a bit of work to do. With a multitude of modifications such as layout changes and arrangements on the site that occurred during the planning approvals phase of three and a bit years, we've seen we have a need to revisit some of the work done previously before finalising the costs and the schedule. A good time consuming example of this is the geotech drilling we're wanting to undertake on site. Because some of the major equipment has been moved around, crushes, The high pressure rollers have been moved. We need to do the geotech drilling before we can finalise the class three estimation. Now this work is currently on hold while we close out the section 10 application that's on the mining site. I've mentioned this section 10 previously and we are still confident it will be resolved. And now that the IPC decision is clear, we think this time is fast approaching. We see this completion of the feasibility study, along with confirmation of the funding strategy, resulting in a final investment decision targeted for late in the March quarter of FY24. Overall, it's very exciting moving into the next phase for all involved with McPhillamy's, and we look forward to progressing our project that has significant potential value for Regis. So, on wrapping up, What the March quarter brought us was, despite the lower gold production, it was another quarter of solid operating cash flows and good progress on our long-term plans. We saw a significant milestone in McPhilemys being delivered, and we've got big milestones to come now at Gardenwell South Underground and the Havana Open Pit. While cash generation has been lower than expected year to date, with gold production set to increase and gross capex starting to drop away in the June quarter, We're expecting cash generation to finish higher as we close out the financial year. So as we now transition the business to the cash building phase at our current producing assets, and we're making some very exciting progress with our growth projects, it certainly is an exciting time at Regis. Okay, so I'll hand it back to you, Paulie, and we'll take any questions.

Thank you, all speakers. And at this time, I would like to remind everyone, in order to ask a question... please press star then the number one on your telephone keypad. And your first question comes from the line of Matthew Friedman from MST Financial. Your line is open.

Sure, thanks. Hi, Jim and team. First question is on the comment that you've got in the report around evaluating scenarios for Duke to North. Just wondering if you can go into maybe a little bit more detail on exactly what's being contemplated there. Obviously, the result in the March quarter, not ideal given not a particularly broad cash margin generated there. So is it really around, I guess the economic, I guess, yeah, the economics of future reserves and I guess particularly noting that you've got a decent tail of low-grade stockpiles there currently in the mine plan, you know, would that material still be economic currently?

Yep. Okay. It's a good question. And so, look, the situation at Duke to North, and I think, as you pointed out in your question, our plans have been to finish the open pit mining and finish the direct run of mine feed phase of Duke to North and then run off into the low-grade stockpiles that we've got. And we have some substantial stockpiles there, some pretty old stockpiles. Basically, with this, now we also have some opportunity in the area. We've been talking about the potential for Commonwealth and a couple of other potential small deposits. The price and the cost movements over the last nine months or so and the inflationary impacts We're really taking a careful look at what those plans are like at the moment and whether they still make as much sense as they did 12 months ago and before that when we were planning on running these low-grade stockpiles down. There was always a view that the low-grade stockpiles are really not going to make too much. They had the potential to make money. They certainly weren't going to make a profit, but they would make cash. As we're looking now and flowing through some of the inflationary costs, we're seeing that we've got to make sure and do a lot more work to make sure we're confident that that's the case, and if it isn't, then adjust our strategy accordingly. You know, really, there's no new material to be in the equation at Duketon North. What we're doing is we're wanting to work through and make sure that the plans that we had in the previous cost environment of 12 months ago is still applicable, and if it isn't, then how should we be cutting the cloth at Duketon North? And we're working through that at the moment, and we'll obviously have a clearer picture on that. We'll update the market.

Yeah, thanks. That's pretty clear, Jim.

Would one hypothetical scenario... Sorry, Matthew. You go. No, you go. Matthew, the other part of your question was talking about the costs at Duketon North for the quarter, and they are high. And the reason why they're high is we've still been, while the total material movement is starting to drop away, which is what we're anticipating as you come to the end of the mine life. And these pits are all pretty small. You run like a cut snake for a couple of quarters to mine the waste and then you produce the ore. um last last quarter our production was lower and that really dragged our um dragged our oil and sustaining cost up so we anticipate that if things run to plan and we're able to get on top of the wet weather issues in the in the blenheim pit which we are anticipating that we'll see the oil and sustaining costs drop there because production will be higher and also the waste movement will be lower

Yeah, that makes sense. Thanks for that. Yeah, so just in terms of what would potentially be considered hypothetically, I mean, if you ended up with a scenario where you determined that the cash margins that could be generated from the stockpiles aren't particularly attractive, would you then potentially look at putting the Jigged North infrastructure on care and maintenance pending successful further exploration discovery? I mean, is that one hypothetical outcome?

Yeah, that's one end of the spectrum of options that we look at for sure. Okay, and the other end? No point running a business if it's losing money, but that's what we're working on at the moment. It's understanding the options that we've got. Some of the deposits that we've been drilling and working on is understanding, can they work in with the low-grade that we've got? as a low-grade still as attractive as it looked. With the continuing movement in some of these prices, they can be quite sensitive. So we're just wanting to make sure we don't undertake something that actually loses us cash.

Yeah, no, that makes perfect sense. Thank you for that. Second question around Gardenwell South Underground. And in particular, I think Anthony touched on the point that that'll be entering commercial production in the June quarter. obviously it was a pretty strong quarter from an oil and sustaining cost perspective at Duketon South. And part of that was the mining costs, $38 million there or thereabouts during the quarter. Just wondering what the quarterly impact to oil and sustaining costs in rough terms will be from Garden Wall South entering commercial production.

Yeah, well, it'll be a bit of a mixed result there. I mean, for a start, The ounces produced from underground at Garden Well will be obviously a lot more than they have been because we hit steady-state stoping production and actually the grades coming out of some of those stopes are pretty good on the levels that they're in. So that would pull down the oil and sustaining costs, but of course as you move into the commercial production the growth capital stops being defined as growth capital and starts being defined as sustaining capital. Now there'll be some elements of the growth capital like specific pump stations and some ventilation infrastructure that's a little bit more what's the right word, sporadic, that will drop out and go in surges. But, you know, the decline in a lot of the development, which was previously classified as great capital, will then shift across and now being included in AISC. So it'll be a bit of a shift from one area into the other, but all of that will now, of course, classification, but all of that will now be divided over more ounces. So overall, a better outcome.

So in broad terms, you'd expect a positive impact on sustaining costs from the commercial production from Garden World South?

Well, overall, it'll be a positive impact on cash flow because for similar cost expenditure, whether it's classified as growth or whether it's classified as oil and sustaining, the cost of running the business is roughly the same. It's just what buckets it's going in. But overall, gold production is up. Yep, that's pretty clear. Okay, that's helpful. That's helpful. Thanks, Jim. And that's actually a similar scenario to what we'd see at, what we expect to see at Tropicana with the Havana pit as well.

Okay, thank you. That's helpful. Thank you very much, Jim.

Your next question comes from the line of Alexander Papayano from Citi. Your line is open.

Hi Jim and team. On McPhilmees, I appreciate that formal numbers will come with the feasibility study, but I wanted to hear your thoughts on what objects and costs might look like, particularly given labour availability in New South Wales might not be as tight as it is in WA. Thanks.

Yeah, look, it's still early days. We're, well, it's not early days. That's probably not the right way to describe it. I think we're, you know, are we seeing pressures on what we anticipate the operating costs to be relative to what we anticipated it would be a couple of years ago and back in 2017? Yes, clearly we are. I think, you know, we haven't updated and we won't be updating any specific more guidance around AISC until we've completed that works. But as a sort of a general question on your... are we seeing the same pressure on labour costs as we are in Western Australia? Look, I think for us it's a little bit early at this stage to say whether we're seeing that explicitly because we're not out there trying to recruit a mining team or a contractor's not giving us the feedback on it. So I couldn't answer that one specifically. I mean, I think from overall impacts on on the information we're getting at the moment on how the construction costs are likely to be. There's certainly been a little bit of an easing of contractor demand, which means that their margins are becoming a little bit tighter. So that element we'll see flow through, or we're anticipating seeing flowing through into our final capex number. But, you know, in terms of the impacts on the operating costs, as I said, it's going to be more than what it was back in 2017, the last time we put some detailed numbers out, how much more is still... We'll see. A lot of it depends on the competitiveness as well of the contractor landscape on the east coast, which we think may actually be better than we have experienced in the last couple of years.

Yeah, understood. That's it for me. Thanks.

As a reminder, if you would like to ask a question, please press star one on your telephone keypad, and your next question comes from the line of Matt Green from Credit Suisse. Your line is open.

Hey, good morning. Just follow on from McPhillips there. Jim, just want to confirm, once you get the section 10 in place, from a permitting perspective, there's no other potential hurdles or appeals or anything that could... potentially delay the timeline to FID?

Not that we anticipate, but that's not to say that, look, I mean, once the Section 10's cleared on that basis, we then get on and get out in the field and we've got a few months of geotech drilling and assessment. Once, when we, in the event that we have final investment decision that's a go, then there's I think there's around about three months' worth of additional permits that we'll need to get, but they tend to be more perfunctory, you know, just permits that you have to get, like, you know, a permit to realign the road, things that we haven't been able to get until we got IPC approval and, frankly, with some government departments, they don't engage with you until you've committed to the project. But in terms of anything that could be a major... a major stop for us. There's nothing in the formal process, whether somebody comes out of left field. I don't know. We're not expecting that. So from here, once we've got the section 10, we see that everything's pretty well in our control, but there's always, you can't be 100% certain.

That's great. Thanks, Jim. And then just secondly on On Goldenwell South, some of the, I guess, ramp-up challenges you had there, you highlighted ground conditions. I was just wondering if you could elaborate, please, on was this quite an isolated event? And I guess, what have you done to sort of help rectify some of those challenges you faced?

Look, I guess the thing that took us, we'd always planned for learning um what the ground conditions were like and making provisions in our times and schedules for uh difficult ground you know structures those sorts of things as we just get used to what ground support regime is required what kind of what we ended up finding was that particularly in the upper areas we started to come across a number of bugs which are like voids underground some of them can be full of water, some of them might be the size of a car, some of them might be a little bit bigger, some of them could be the size of a football. You just get these vogues full of crystals and geologically interesting, but geotechnically a pain in the backside. you know it's if it's in the side wall for example you can figure out how to manage it but if it's in the backs or if it's in the floor you've got to come up with the right protocols because you don't want you know you don't want to be driving over a bug and potentially uh disappearing down into it in an extreme place so it just took a while for us to get to wrecking to develop our protocols around that and it means that a certain heading that might have had 100 meters a month in it or something like that we had to slow that down in the early stages What we've found is that as we've progressed with depth, they've become less in number. So that's making it a little bit easier, less in size. But that's not to say that they've gone away. But the pleasing thing is that Stuart and the team up on site have worked their protocols out. So instead of sort of frankly coming across it and sitting there scratching their heads for a couple of days trying to figure out how to safely manage it and work on ideas. They've now got their protocols as how to deal with that and move much more quickly through it. Anything you wanted to add to that Stuart?

No, I mean I think that it's not conditions that are unusual It's just a lot of the team have done it in other places. This is the first time the team's actually got together and all done it together at Gardenwell South and they have to work it out. So I wish they had.

And the other was water. We've always known the mine was going to be quite wet. We've put in provisions. We've got in quite large pump stations, as I think we've put photos in some of the quarterlies in the past. but sometimes the water doesn't come out exactly where you expect it to be, and so you've got to put holes in different directions and allow time for the water to drain, and we understand that a lot better now. So, you know, we're now putting out dewatering holes not where we think they should go but where we know they should go because of the experience on the level above or two levels above.

Okay, no, that's clear and helpful. Thanks, Ed. Sorry, go ahead.

No, that's it, Matt.

Yeah, no, that's great. So it sounds like this is quite an isolated circumstance in the upper levels. It's not really sort of changing your view on, I guess, scheduling or scope design on a go-forward basis. You're still quite happy with where that's at.

well i'd much rather if it wasn't there at all um and every mine is different i guess that's the point we're probably trying to make is that every mine is different um and when you start up um you know you get these these events these situations that you might have thought a bit about and planned for and sometimes it goes exactly the way you think it's going to go and other times you might have over planned for it or you might have under planned and our point is that in this case is you know we're only just getting into the in we're getting into the production areas and we're producing in it and now and it just takes a while to understand how you get into a rhythm you know if a mine's been going for for three or four years, you understand how to deal with the issues and everybody's sort of well drilled on it because every mine is different. And if you're lucky, you go off without a hitch. um i've never heard of that happening but sometimes i guess it must do but you just got to um you know as much as we we learned some lessons from rosemont and we we've uh in that there's basically very little provision for this sort of thing and we copped it pretty hard when we were starting that up so we made it we made a lot more careful thinking about how we plan around these these events if we hadn't have done it it would have been much more significant of an impact than it was but it was still it was still there but basically we've we've learned we've moved on and the issues are still there water is still there and the bugs are still there we just like the bugs are disappearing a bit more with depth or becoming less of a scale size issue but the issues are still there we just know how to deal with them more efficiently now yeah okay that's great thanks for the call that's all for me thanks

There are no further questions at this time. I'd like to turn the call back over to Jim for closing remarks.

All right. Thanks, Paulie. Thanks, everybody. Appreciate you joining us and thanks for the questions. And if anybody has any follow-up questions, please give us a call, get in contact through Ben. And otherwise, have a good day. Thanks very much. This concludes today's conference call. You may now disconnect.